by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
More than 200,000 retired state government workers and their dependents could face changes to their state health plans.
The North Carolina Supreme Court heard a case Monday regarding whether the state can charge a premium for certain retired state workers for their enrollment in the state health plan. This debate stems from the response to an accounting standard in 2008 which required state governments to begin disclosing the unfunded liabilities for state government retiree health benefits, revealing a disquieting $27 billion unfunded liability for North Carolina.
To begin to address this gap, Republicans, who took over the state government majority in 2010, put forth a premium requirement for some retirees that went into place in 2011. In 2012, state workers sued the state claiming the state was contractually obligated to offer premium-free plans.
The debate continued when a trial court judge ruled in favor of the state workers in 2017. This was then overturned in 2019.
In 2017, Republicans further addressed the state’s unfunded liability, adding a provision to the state budget disallowing free health coverage upon retirement for new employees hired after January 1, 2021. This action sought to diminish the fiscal threat posed by the ballooning cost of health plans.
Supporters of the premium-free health insurance insist state workers were promised such benefits and that they have already been earned. A ruling in favor of state workers would cost the state millions of dollars. State lawyers, however, reasoned that health insurance participation is voluntary and that state health plans may be changed at any point to adjust to fiscal threats.
In the next few months, the North Carolina Supreme Court is expected to decide whether the legislature’s decision ten years ago to charge a premium violated the agreement with workers.